Scored Decisions · Industrial distribution

In a replay of 2025, new reorder points cut short lines 36% and free $450,000 of stock

One reorder formula, set in 2021, runs every item in the warehouse. Reset by item and replayed against a year of orders, the new points raise 2,100 items, lower 4,900, and improve stockouts and cash together.

Illustrative engagementComposite figures. Shows the shape of the work, not a client result.
Setting
A $30M industrial MRO distributor, about 9,000 stocked items
Industry
Industrial distribution
Duration
About four weeks
Line
Scored Decisions
36%Fewer order lines short
$450,000Less average inventory at cost
95.6%Fill rate, against 93.1% today
4,900 / 2,100Reorder points lowered and raised
01

The situation

The purchasing manager decides where the reorder point sits for each of 9,000 items. The rule is one formula for everything, two weeks of average demand plus two weeks of safety stock, set in 2021. It feels fine because the manager overrides it from memory when something looks wrong. A single formula is wrong in both directions at once: too low on volatile items with long lead times, and too high on slow movers.

02

How it runs

  1. 1

    We name the baseline. The 2021 formula stays in every comparison, judged on stockouts and on cash together, never on one alone.

  2. 2

    We write down the expectation before the data is opened. Most of the cash should sit in slow movers, and most of the stockouts should come from fewer than 1,500 items.

  3. 3

    We build on 2023 and 2024. Each item gets a forecast of demand over its own lead time, with its own variability, and a service target by item class.

  4. 4

    We freeze the points and write down a forecast of a 95.9% fill rate on $3.70M of inventory. Then we replay every 2025 order line once against both sets of points. The replay returns 95.6% on $3.75M.

  5. 5

    We try the simpler ways. Recomputing the old formula on current demand recovers about a third of the gain. A safety stock by ABC class recovers a little over half of the cash and about three fifths of the stockouts. Neither matches the item-level points on either count.

  6. 6

    We hand back the points as a field the ERP's suggested-order screen reads, the list of items that moved and why, the memo, and the test cell design.

03

What it finds

01

Stockouts sit in a small corner of the catalog.

Under the current formula, 1,180 items produce 71% of the short lines.

So what Raising 2,100 points goes after the items behind most of the short lines, without touching the rest.

02

The cash sits in the slow movers.

Lowering 4,900 points takes $450,000 out of average inventory, worth about $90,000 a year at a 20% carrying cost.

So what The money to fund the higher points is already on the shelf.

03

The simple fixes help, and neither closes the gap.

The old formula on fresh demand closes about a third of it. A safety stock by ABC class closes a little over half of the cash and about three fifths of the stockouts.

So what The gain comes from setting each item on its own history, not from updating one number.

04

What changes

The purchasing manager reviews a suggested-order list built on the new points and overrides by exception, with the reason recorded. For one quarter, half the product lines, chosen at random, run the new points and half keep the old formula. Comparing fill rate and inventory between the halves tests what the replay assumes.

05

What it does not prove

A replay, not a live run.

The replay holds 2025 demand and lead times fixed. A stockout that sent a customer elsewhere is missing from the demand it replays.

Cash arrives slowly.

The $450,000 is average inventory once the lowered points work through. On slow movers that takes most of a year.

One year judged.

A year with a supplier shock or a lost account would move the points, and a quarterly refit is what catches it.

Next step

Send Kinetric the formula behind your reorder points, and we will tell you what a replay of last year would show.

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